CITATION: Bossio v. Nutok Corporation, 2015 ONSC 1305

BELLEVILLE COURT FILE NO.: CV-10-0123-00

DATE: 2015/02/26

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

SALVATORE BOSSIO

Applicant/Plaintiff/Defendant by Counterclaim

– and –

NUTOK CORPORATION, KUL HOLDINGS LTD, and WOLFGANG H. KYSER

Respondents/Defendants/Plaintiffs by Counterclaim

Ronald B. Moldaver, Q.C., for the Applicant/Plaintiff/Defendant by Counterclaim

John Philpott, for the Respondents/Defendants/Plaintiffs by Counterclaim HEARD AT BELLEVILLE: December 9-13, 2013 Last Written Submissions received July 29, 2014

REASONS FOR JUDGMENT

KERSHMAN J.

Introduction:

1The Plaintiff, Mr. Bossio, and the Defendant, Mr. Kyser, were family friends who often met at social gatherings and then became business associates. The business arrangements between the parties were often informal. During the course of the parties’ business relationship significant sums of money were borrowed by Mr. Bossio and secured by way of mortgages on Mr. Bossio’s property or promises to pay confirmed in promissory notes.

2The problems in this case arise because of the incomplete, unclear, and sometimes absent evidentiary record of the transactions between the parties. The main issue in this litigation is: who owes whom what?

3Mr. Bossio is a businessman with a grade ten education. Mr. Kyser, on the other hand, is a former lawyer, with extensive experience in real estate.

History of Proceedings:

4Mr. Bossio initiated a Notice of Application on May 5, 2010, (court file number CV–10–0123–00) against the Defendants: Mr. Kyser, NUTOK Corporation (“NUTOK”), and KUL Holdings (“KUL”), also known as the “Defendant Group.” The application requested various forms of relief including an accounting of advances and payments made by Mr. Bossio in relation to the NUTOK and KUL mortgages, registered against Mr. Bossio’s property.

5On June 3, 2010, Mr. Bossio also commenced an action against the Defendant Group (court file number CV–10–0151–00). The action requested: (i) injunctions against the Defendants, KUL and NUTOK, to prevent them from enforcing the rights under their mortgages; (ii) an accounting; and, (iii) damages against Mr. Kyser for breach of fiduciary duty and tracing.

6The Defendant Group filed a Statement of Defence and Counterclaim against Mr. Bossio, on July 9, 2010 for: (i) possession of the mortgage property; (ii) payment by Mr. Bossio for the amounts due to NUTOK and KUL under their respective mortgages; and, (iii) payment of monies owing by Mr. Bossio to the Defendant Group resulting from loans, documented in promissory notes.

7The application and the action were amalgamated by Order of Pedlar J. on July 27, 2010.

Factual Background:

8Mr. Bossio has been involved in the field of investment relations for at least 15 years. He gave evidence that he had been involved in multiple investment transactions over the years, some of which required his travelling as far as Germany to discuss transactions with clients.

9Mr. Kyser, one of the Defendants, is a former lawyer who practiced real estate law and worked for a real estate company. He retired from the practice of law a number of years ago.

10NUTOK, one of the corporate Defendants, is a company controlled by Mr. Kyser. Mr. Kyser is a shareholder and director of NUTOK. The other shareholders and directors are his family members. Mr. Kyser is the directing mind of NUTOK, and he is significantly involved in the daily operations of the company.

11KUL, the other corporate Defendant, is a holding company, administered by Mr. Kyser.

12Between 2003 and 2009, Mr. Bossio obtained a series of loans. Some of the loans were made personally by Mr. Kyser and others were made by NUTOK and/or KUL. The relevant series of financial transactions are described later in this decision.

13On April 15, 2004, Mr. Bossio mortgaged the property municipally known as 812 Island Road, Madoc, Ontario, to the Defendant, NUTOK, for $100,000. The mortgage was registered on April 15, 2004, as Instrument No. QR641273, in the Land Registry Office for the Land Registry Division of Hastings. The lands are more particularly described as follows:

Parcel 1: All of those parts of Lot 31 and 32, Concession 10, Township of Madoc, County of Hastings, lying east and north of the travelled township road crossing the said lands in the generally north-south direction.

Parcel 2: All that part of Lot 32, Concession 9, Township of Madoc, County of Hastings, lying to the north-east of the travelled township road.

14The aforesaid properties will hereby be known as the “Madoc Lands.”

15On January 6, 2006, a second mortgage was registered over the Madoc Lands in favour of the Defendant, KUL, for $100,000, which was registered as Instrument No. QR663875. The evidence indicates that the monies advanced under this mortgage belonged to Mr. Kyser and that the mortgage was held in trust for Mr. Kyser.

16In or about May 2008, a fire destroyed the house on the Madoc Lands. The property was insured by Bay of Quinte Mutual Insurance. In November 2008, $375,500 in insurance proceeds was paid out by the insurer. Mr. Bossio received $175,500 of the insurance proceeds to rebuild the house. NUTOK and KUL, holding mortgages on the property, were also entitled to proceeds by virtue of a loss payee clause in the insurance policy. Pursuant to a written authorization and direction, Mr. Kyser received $200,000 of the insurance proceeds, in trust, on behalf of NUTOK and KUL. Mr. Kyser applied these monies against a number of outstanding unsecured loans and other items as opposed to applying the insurance proceeds towards the outstanding secured mortgage debts.

17At the end of the trial, both counsel provided written submissions. The Court asked both counsel for reply submissions, which the Defendants provided. The Plaintiff indicated that it would not be providing any reply submissions.

Comments Relating to the Credibility of Parties:

18Testimony was given by Mr. Cameron Chell and Mr. Paul Millar, indicating that Mr. Bossio has been involved in many investments and transactions. Both witnesses testified that Mr. Bossio is a sophisticated investor.

19Based on the aforesaid witness testimony and the evidence in general, this Court finds that, notwithstanding his grade ten education, Mr. Bossio was a sophisticated investor.

20The Court notes that Mr. Kyser was careful to keep clear records in relation to the promissory notes, documenting what was owed. The Court also notes, however, that Mr. Kyser produced little evidence of the transactions or monies actually advanced to Mr. Bossio. The Court fails to understand why Mr. Kyser did not produce documentary evidence of the advances by way of bank statements or cancelled cheques, particularly considering his legal and business experience. Mr. Kyser did not provide any explanation as to why this evidence was not preserved or produced.

Issues:

1. Is There Evidence of Loans to Mr. Bossio from the Defendant Group?

2. Did Mr. Bossio repay any of the borrowed monies?

3. Did Mr. Kyser apply the insurance proceeds properly when he applied them to unsecured loans as opposed to the mortgages?

4. Did the Defendant Group provide a proper accounting to Mr. Bossio for the monies that that it claimed were due and owing?

5. Are the power of sale proceedings valid in relation to the monies owing to NUTOK and KUL?

6. Are any amounts claimed in this action statute barred?

7. What amounts are owing to Mr. Kyser, NUTOK and KUL by Mr. Bossio?

8. Is Mr. Bossio entitled to damages against Mr. Kyser due to the failed refinancing?

Issue #1: Is There Evidence of Loans to Mr. Bossio from the Defendant Group?:

Summary of the Relevant Transactions Between the Parties:

21The following chart provides an overview of the transactions involving the alleged flow of money to Mr. Bossio from the Defendant Group.

Date

Item

Amount & Interest

Secured or Unsecured Debt

Additional Comments:

September 18, 2003

Signed promissory note from Bossio to NUTOK

$5,000 at 12% on demand

Loan given to Bossio by NUTOK (Determination regarding secured/unsecured made below)

• Consolidated into December 8, 2003 loan - No dispute between the parties

December 8, 2003

Signed promissory note from Bossio to NUTOK

$25,000 at 12% on demand

Secured loan to Bossio from NUTOK

• No dispute between the parties
• Security included: assignment of golf membership and a first mortgage on the Madoc Lands

January 30, 2004

Signed promissory note from Bossio to NUTOK

$6,000 at 12% on demand

Unsecured loan to Bossio from NUTOK

-Dispute as to the loan

January 30, 2004

Loan from Kyser to Bossio

$17,500 (USD) at 8% on demand

Unsecured loan to Bossio from Kyser

-Dispute between the parties as to the arrangement

• Loan for the purchase of Xtra Gold Shares
• Memorandum of Agreement with respect to this loan included to purchase $35,000.00 worth of Xtra Gold shares, of which 50,000 shares were for Bossio and 50,000 shares were for Kyser
• Shares sold 2006-2007; Bossio did not tell Kyser until late 2008

April 8, 2004

Mortgage from Bossio in favour of NUTOK

$100,000 at 12% monthly; including

$25,000 advanced on December 8, 2003

Secured loan to Bossio from NUTOK

• Mortgage to secure the $100,000 advanced by NUTOK to Bossio, 2003 - Dispute between the parties as to the arrangement

May 27, 2005

Signed promissory note from Chell & Bossio to Kyser

$100,000 US at 20% interest

Unsecured loan to Bossio from Kyser

• Funds directed by Chell and Bossio to BPS -No dispute between the parties

May 27, 2005

Undertaking from Bossio to repay NUTOK

$100,000 at 20% interest

• Undertaking to repay $100,000: $50,000 on September 1, 2005; $25,000 on October 1, 2005; and $25,000 on December 1, 2005

July 7, 2005

Signed promissory note from Bossio to NUTOK

$75,000 at 18% due on demand

Loan given to Bossio by NUTOK. (Determination regarding secured/unsecured status, in detailed reasons below)

-Dispute between the parties as to the loan

July 7, 2005

Memorandum of Agreement from Bossio to NUTOK

$75,000 at 12% due on demand

• Memorandum of Agreement according to Kyser indicated: Nutok Mortgage was to secure the $25,000 loan from December 8, 2003; Bossio desired a further advance of $65,000; Bossio would pay $10,000 fee included in the promissory note and secured by the NUTOK mortgage; Bossio directs the $65,000 be paid to BOTB. Advanced July 7, 2005
• Mortgage rate only at 12% while Promissory Note rate at 18%

November 2, 2005

Promissory Note from Chell and Bossio to 831849 Ontario Ltd.

$75,000 (USD) at 20% interest

• This is not valued. - It was conceded at trial that this matter is statute barred Furthermore this note is not payable to any of the named Defendants

January 1, 2006 Registered January 6, 2006

Mortgage from Bossio to KUL on the Madoc Lands

$100,000 at 12% interest

Secured loan to Bossio from KUL (in trust for Kyser)

• Made by way of advances as follows: January 5, 2006 $25,000 (wire transfer); February 2, 2006 $25,000 (wire transfer); March 10, 2006 $25,000 (bank draft); and April 30, 2006 $22,877.48 + $2122.52 deducted as interest.
• KUL Mortgage fully advanced by April 30, 2006 - Some dispute between the parties regarding $25,000 of the $100,000

July 7, 2006

Signed promissory note from Bossio to Fontainebleau Apartments Ltd.

$20,000 at 10% interest due on demand

• This amount is not included in Counterclaim - The promissory note does not apply because the payee is not one of the named Defendants - Not relevant to the dispute

August 14, 2006

Signed promissory note from Bossio to Kyser

$10,000 at 10% interest

Unsecured loan to Bossio from Kyser

• No dispute between the parties

February 1, 2007

Signed promissory note from Bossio to Kyser

$10,000 at 10% interest

Unsecured loan to Bossio from Kyser

• No dispute between the parties

July 27, 2007

Signed promissory note from Bossio to Kyser

$10,000 at 10% interest

Unsecured loan to Bossio from Kyser

• No dispute between the parties

November 2, 2007

Signed promissory note from Bossio to Kyser

$25,000 at 10% interest

Loan given to Bossio by Kyser. (Determination regarding secured/unsecured made below)

• No dispute between the parties

November 2, 2007

Undertaking by Bossio to Kyser and NUTOK

• Undertaking to secure all outstanding debts with a mortgage and to give mortgage to Kyser for monies owing to Nutok and/or Kyser
• Mortgage never signed or registered

May 2008

Fire at property

• Loss payees on insurance policy were Nutok and KUL as mortgagees

October 31, 2008

Insurance proceeds from property paid to Kyser and Bossio

$200,000 of insurance proceeds paid to Kyser in trust; $175,500 of insurance proceeds paid to Bossio for house repairs

• Kyser provided an “Authorization and Direction” authorizing the $200, 000 to be paid to Kyser in trust
• Kyser applied $200,000 to outstanding unsecured debts owing to Kyser, Nutok, and Fontainebleau

January 12, 2009

Signed promissory note from Bossio to Kyser to finish Bossio’s house

$15,000 at 10% interest

Unsecured loan to Bossio from Kyser

• No dispute between the parties

February 10, 2009

Signed promissory note Bossio to Kyser to finish Bossio’s house

$10,000 at 10% interest

Unsecured loan to Bossio from Kyser

• Ironwood cheque not cashed -Dispute between the parties as to the loan

Detailed Review of the Relevant Transactions Between the Parties: September 18, 2003 Loan:

Defendants’ Position:

22On September 18, 2003, a loan was taken by Mr. Bossio from NUTOK. The loan was documented by way of a promissory note signed by Mr. Bossio. The principal amount of the loan was $5,000, bearing interest at the rate of 12% per annum. The loan was due on demand.

Plaintiff’s Position:

23Mr. Bossio acknowledges that he signed the promissory note and that these monies were received.

Analysis:

24The Court finds that $5,000 was advanced to Mr. Bossio from NUTOK. These monies were subsequently consolidated into the NUTOK loan of $25,000, dated December 8, 2003, which was later became part of the NUTOK mortgage.

December 8, 2003 Loan:

Defendants’ Position:

25On December 8, 2003, a loan was taken by Mr. Bossio from NUTOK. This loan was documented by way of a promissory note signed by Mr. Bossio. The principal amount of the loan was $25,000, bearing interest at the rate of 12% per annum. The loan was due on demand.

26The loan included a commitment fee of $1,250 payable to NUTOK. Mr. Bossio granted security to NUTOK, which included an assignment of Mr. Bossio’s golf membership at a golf club, together with a first mortgage over the Madoc Lands. A separate receipt was provided by Mr. Bossio acknowledging the $25,000 in advances. The evidence is that the September 18, 2003, promissory note was consolidated into the December 8, 2003, loan.

Plaintiff’s Position:

27Mr. Bossio acknowledges that he signed the promissory note and received these funds.

Analysis:

28Based on the aforesaid evidence, the Court finds that this loan was made and the funds were received by Mr. Bossio. The Court also finds that the September 18, 2003, loan was consolidated in this loan. As such, as of December 8, 2003, the total owing by Mr. Bossio to NUTOK was $25,000, as a secured loan.

January 30, 2004 Loan:

Defendants’ Position:

29On January 30, 2004, a loan was taken by Mr. Bossio from NUTOK and documented by way of a promissory note. The principal amount of the loan was $6,000, bearing an interest rate of 12% per annum. The loan was due on demand.

30Mr. Kyser claims that he gave Mr. Bossio a cheque for $5,000 and an additional $1,000 in cash. He did not produce a copy of the cheque for $5,000, nor did he produce a receipt for the $1,000 in cash.

Plaintiff’s Position:

31Mr. Bossio argues that he did not receive any of these monies, even though he signed the promissory note.

Analysis:

32Mr. Kyser did not produce a copy of the cancelled cheque for $5,000 or a receipt for the $1,000. Notwithstanding the lacking evidentiary record, on a balance of probabilities, this Court finds that Mr. Bossio received the funds. This is supported by the fact that Mr. Bossio signed the promissory note, a formality undertaken on prior occasions to evidence his receipt of a loan.

January 30, 2004 – Xtra Gold Loan:

Defendants’ Position:

33On January 30, 2004, a loan was taken by Mr. Bossio from Mr. Kyser, and documented by way of promissory note. The principal amount of the loan was $17,500 USD, bearing interest at the rate of 8% per annum. The loan was due on demand. This loan related to Mr. Bossio’s purchase of 50,000 Xtra Gold shares.

Plaintiff’s Position:

34Mr. Bossio acknowledges that he signed the promissory note, that these monies were received, and that he purchased 50,000 Xtra Gold shares for his own account.

Analysis:

35Based on the aforesaid evidence, the Court finds that this loan was made and the funds were received by Mr. Bossio. This loan was for the purchase of Xtra Gold shares, which will be discussed further later on in this decision.

January 30, 2004 – Xtra Gold Memorandum of Agreement:

Defendants’ Position:

36A Memorandum of Agreement dated January 30, 2004, states that Mr. Bossio and Mr. Kyser jointly invested in a share issue of Xtra Gold to the extent of $35,000 USD.

37Mr. Bossio requested that Mr. Kyser advance the monies for the venture. The agreement between the parties was as follows:

a) Mr. Kyser would provide $35,000 USD. Mr. Kyser would issue Mr. Bossio with a demand note for Mr. Bossio’s half of the shares, namely: $17,500 USD, with an interest at the rate of 8% per annum, calculated monthly, and payable out of the sale proceeds of the shares of Xtra Gold. In addition Mr. Bossio was to pay a deemed return of 8% on the $17,500 USD.

b) Mr. Bossio was to purchase 100,000 shares of Xtra Gold at a price of $0.35 USD per share, which was to be deposited into Haywood Securities Inc., in trust. The shares were to be divided evenly between Mr. Bossio and Mr. Kyser, subject to the payments to be made by Mr. Bossio towards Mr. Kyser’s lien over Mr. Bossio’s half of the shares, as per the demand note.

c) When the shares were disposed of, the proceeds would be applied in the following manner:

a) Repayment of the initial investment of $35,000 USD;

b) Payment of interest on the promissory note at 8%, as well as a deemed 8% return to Mr. Kyser; and,

c) The balance to be split equally between Mr. Bossio and Mr. Kyser.

Plaintiff’s Position:

38Mr. Bossio acknowledges that he signed the Memorandum of Agreement.

Analysis:

39Based on the evidence, the Court finds that this document was enforceable as between the parties.

April 8, 2004 Mortgage:

Defendants’ Position:

40On April 8, 2004, a mortgage was given by Mr. Bossio to NUTOK over the Madoc Lands. The principal amount of the mortgage was $100,000. The mortgage would bear interest at the rate of 12% per annum and was payable interest only. The interest adjustment date was March 2, 2004, with a first payment date of April 2, 2004. The mortgage was due on demand, and was governed by Standard Charge Terms 9320.

41The Defendant Group argues that the mortgage was advanced in two tranches. The first tranche was for $25,000, paid in December 2003, and the second was for $75,000, advanced in July 2005. Part of the second tranche included a $10,000 fee paid to NUTOK.

Plaintiff’s Position:

42Mr. Bossio argues that while a $100,000 mortgage in favour of NUTOK was registered, there was never any actual advance by NUTOK under the first mortgage. He claims that this becomes evident when considering the $5,000 promissory note that was consolidated with the December 8, 2003, promissory note for $25,000. He argues that in April 2004, only a mortgage of $25,000 was borrowed on the property, with the balance of $75,000 inclusive of a $10,000 fee to NUTOK being advanced on July 7, 2005.

Analysis:

43Having reviewed the evidence, the Court finds that the mortgage was signed by Mr. Bossio and the full $100,000 was advanced to Mr. Bossio. The Court also finds that the mortgage was advanced in two tranches: $25,000 in December 2003, and the balance in July 2005. The July 2005 advance will be discussed later on in this decision.

May 27, 2005 Loan:

Defendants’ Position:

44On May 27, 2005, a loan was taken by Mr. Bossio and Mr. Chell from Mr. Kyser for $100,000 USD, bearing interest at the rate of 20% percent per annum, calculated and payable monthly. The funds were directed by the borrowers to a company called BPS.

45Subsequent to the loan being granted, Mr. Chell filed for bankruptcy. As such, the only person potentially liable for this loan is Mr. Bossio.

Plaintiff’s Position:

46Mr. Bossio acknowledges that he and Mr. Chell signed the promissory note and that the monies were advanced to BPS.

Analysis:

47Based on the aforesaid evidence, the Court finds that the loan was made and the monies were advanced. Since Mr. Chell filed for bankruptcy, the Court finds that Mr. Bossio is liable for the total debt, subject to any further findings of this Court relating to the Limitations Act.

May 27, 2005 Undertaking:

Defendants’ Position:

48On May 27, 2005, Mr. Bossio and Mr. Chell signed an Undertaking in favour of Mr. Kyser. In the Undertaking, they promised to repay the May 27, 2005, $100,000 USD loan, as follows:

a) $50,000 USD on September 1, 2005;

b) $25,000 USD on October 1, 2005; and,

c) $25,000 USD on December 1, 2005.

Plaintiff’s Position:

49Mr. Bossio acknowledges that he and Mr. Chell signed the documents.

Analysis:

50The Court finds that the agreement is valid and that the monies are owing, subject to any further findings relating to the Limitations Act.

July 7, 2005 Loan:

Defendants’ Position:

51On July 7, 2005, a loan was taken by Mr. Bossio from NUTOK, and documented by way of a promissory note. The principal amount of the loan was $75,000, bearing interest at the rate of 18% per annum, calculated and payable monthly. The loan was due on demand. This was the second and final advance on the NUTOK mortgage.

Plaintiff’s Position:

52Mr. Bossio claims that this loan was not the second advance on the NUTOK mortgage of $100,000, registered in April 2004. Rather, these monies were advanced approximately 15 months after the mortgage was registered, and were not part of the NUTOK mortgage.

Analysis:

53The Court prefers the evidence of the Defendants. This loan was made simultaneously with the July 7, 2005, Memorandum of Agreement (discussed below) which links this loan to the NUTOK mortgage. The Court notes that the interest rate on the mortgage is 12% per annum, compared to the interest rate on the promissory note, which is 18% per annum.

54The Court finds that this $75,000 loan is the second tranche of the April 8, 2004, mortgage, and that the interest rate on the full $100,000 is 12% per annum, not 18% per annum. The Court also finds that the loan was fully advanced.

July 7, 2005 – Memorandum of Agreement:

Defendants’ Position:

55The Defendant Group argues that the Memorandum of Agreement was signed by Mr. Bossio and was in regards to the second tranche of the mortgage given by NUTOK in April 2004. The Memorandum states that there would be a $65,000 advance to BOTB, Mr. Bossio’s company, plus a $10,000 fee payable to NUTOK for arranging the financing.

Plaintiff’s Position:

56The Plaintiff argues that the Memorandum of Agreement does not confirm the Defendants’ position that this was an advance under the NUTOK mortgage. He submits that the monies were advanced approximately 15 months after the NUTOK mortgage was registered.

Analysis:

57A review of the Memorandum of Agreement dated July 7, 2005, between Mr. Bossio and NUTOK reveals that the agreement contains at least one error. The second recital refers to monies being advanced without interest, whereas, these amounts did bear interest.

58The Court finds that, while there may have been an error in this recital, the $100,000 advanced by NUTOK to Mr. Bossio was secured by the April 2004 mortgage. According to the Memorandum of Agreement, dated July 7, 2005, the $65,000 was due on October 31, 2005. This amount was not paid off at that time.

59In the Memorandum of Agreement Mr. Bossio directed that the $65,000 be paid to BOTB. A cancelled cheque to BOTB from NUTOK was provided as evidence of the $65,000 advance. The Court finds that the $65,000 was sent to BOTB and that the $10,000 fee was paid to NUTOK as per the Memorandum of Agreement. The Court is aware that the second tranche of this mortgage was advanced approximately 15 months after the mortgage was registered. The July 7, 2005, signed Memorandum of Agreement makes reference to this advance being part of the NUTOK mortgage. The Court finds that the second tranche of $75,000 advanced in July 2005, was made pursuant to the NUTOK mortgage, dated April 8, 2004.

November 2, 2005 Loan:

Defendants’ Position:

60On November 2, 2005, a loan was taken by Mr. Bossio and Mr. Chell from 831849 Ontario Inc., and documented by way of a promissory note. The principal amount of the loan was $75,000 USD, together with interest at the rate of 20%. The loan was due on December 31, 2005. Mr. Chell filed an assignment in bankruptcy, after the loan was taken out.

61At trial the Defendants acknowledged that this loan is statute barred.

Plaintiff’s Position:

62At trial, Mr. Bossio agreed that this loan was statute barred.

Analysis:

63The Court notes that the promissory note indicates that the loan is not payable to any of the Defendants, but rather to a third-party. The Court finds that, since the promissory note is payable to a third-party, it is not relevant to the dispute. Even if the claim was relevant to the dispute at issue, the Court would find that this promissory note is statute barred.

January 1, 2006 Mortgage:

Defendants’ Position:

64A mortgage, dated January 1, 2006, was taken out by Mr. Bossio in favour of KUL and was registered against the Madoc Lands on January 6, 2006. The principal amount of the mortgage was $100,000, bearing interest at the rate of 12% per annum, calculated monthly and not in advance. The mortgage was advanced as follows:

a) First tranche advanced on January 5, 2006 – $25,000 by wire transfer;

b) Second tranche advanced on February 2, 2006 – $25,000 by wire transfer;

c) Third tranche advanced on March 10, 2006 – $25,000 by bank draft;

d) Fourth tranche advanced on April 30, 2006 – $22,877.48 was advanced by bank draft, with $2,122.52 deducted as interest owing to that date. This breakdown was set out in a letter from Mr. Kyser to Mr. Bossio, dated May 16, 2006.

Plaintiff’s Position:

65Mr. Bossio acknowledges that $100,000 was advanced under the KUL mortgage. The amount of $75,000 was advanced by March 10, 2006. Mr. Bossio submits that the interest on the KUL mortgage should have run from May 1, 2006; namely, once all of the monies had been advanced in the fourth tranche of $22,871.48, with the balance of $2,122.52 (i.e.: $25,000 - $22,871.48 = $2,122.52) being the interest for the period prior to April 30, 2006.

Analysis:

66Since Mr. Bossio’s lawyer acknowledged that the KUL mortgage was fully advanced, the Court finds that the monies due and owing under the KUL mortgage are payable by Mr. Bossio. The Court further finds that interest under the mortgage was paid to April 30, 2006. To determine the amount owing on this mortgage, adjustments will have to be made to the calculation of interest to reflect the varying amounts of the principal advanced from May 1, 2006, instead of as calculated in the power of sale documentation (i.e. as if the advance occurred in one lump sum).

67The calculation of the amount owing will be made by this Court, and is detailed later in this decision.

68A Declaration of Trust prepared by Mr. Kyser, dated January 6, 2006, indicates that the KUL mortgage was held in trust for Mr. Kyser. Based on this un-contradicted evidence, the Court finds that the KUL mortgage was really a secured loan belonging to Mr. Kyser, notwithstanding that the mortgage was not registered as such.

July 7, 2006 Loan:

Defendants’ Position:

69On July 7, 2006, a loan was taken by Mr. Bossio from Fontainebleau Apartments Ltd., and documented by way of a promissory note. The principal amount of the promissory note was $20,000, bearing interest at the rate of 10% per annum.

Plaintiff’s Position:

70Mr. Bossio acknowledges signing the promissory note and receiving these monies. He argues that this promissory note was not part of the Defendant Group’s Counterclaim and that it is not payable to any member of the Defendant Group.

Analysis:

71The Court confirms that no claim for this promissory note was made in the Defendants’ Counterclaim. Furthermore, the promissory note is payable to Fontainebleau Apartments Ltd., who is not a party to the present litigation. Mr. Kyser’s testified that Fontainebleau was a subsidiary of NUTOK. However, no documentary evidence was provided to verify this statement.

72In written submissions, Mr. Kyser’s counsel alleged that Mr. Kyser administers Fontainebleau; the written submissions do not state that Fontainebleau is a subsidiary of NUTOK. This was later contradicted in oral submissions when Mr. Kyser’s counsel stated that Fontainebleau is a subsidiary of NUTOK.

73Based on the lack of documentary evidence supporting the claim that Fontainebleau Apartments Ltd. is a subsidiary of NUTOK, and the written submission that Mr. Kyser, instead, administered the company, the Court does not find, on a balance of probabilities, that Fontainebleau Apartments Ltd. was a subsidiary of NUTOK. The Court further notes that the promissory note allegedly documenting this transaction was not included by the Defendants in their pleadings. As such, the Court finds that there are no monies due and owing on this promissory note by Mr. Bossio.

August 14, 2006 Loan:

Defendants’ Position:

74On August 14, 2006, a loan was taken by Mr. Bossio from Mr. Kyser, and documented by way of a promissory note. The principal amount of the loan was $10,000, bearing interest at the rate of 10% per annum. The loan was due on demand.

Plaintiff’s Position:

75Mr. Bossio acknowledges that he signed this promissory note, and that these monies were received.

Analysis:

76Based on the aforesaid evidence, the Court finds that this loan was made and the funds were received by Mr. Bossio.

February 1, 2007 Loan:

Defendants’ Position:

77On February 1, 2007, a loan was taken by Mr. Bossio from Mr. Kyser, and documented by way of a promissory note. The principal amount of the loan was $10,000, bearing interest at the rate of 10% per annum. The loan was due on demand.

Plaintiff’s Position:

78Mr. Bossio acknowledges that he signed the promissory note, and that these monies were received.

Analysis:

79Based on the aforesaid evidence, the Court finds that this loan was made, and the funds were received by Mr. Bossio.

July 27, 2007 Loan:

Defendants’ Position:

80On July 27, 2007, a loan was taken by Mr. Bossio from Mr. Kyser, and documented by way of a promissory note. The principal amount of the loan was $10,000, bearing interest at the rate of 10% per annum. The loan was due on demand.

Plaintiff’s Position:

81Mr. Bossio acknowledges that he signed the promissory note and that these monies were received.

Analysis:

82Based on the aforesaid evidence, the Court finds that this loan was made and the funds were received by Mr. Bossio.

November 2, 2007 Loan:

Defendants’ Position:

83On November 2, 2007, a loan was taken by Mr. Bossio from Mr. Kyser, and documented by way of a promissory note. The principal amount of the loan was $25,000, bearing interest at the rate of 10% per annum. The loan was due on demand.

Plaintiff’s Position:

84Mr. Bossio acknowledges that he signed the promissory note and received these monies.

Analysis:

85Based on the aforesaid evidence, the Court finds that this loan was made and the funds were received by Mr. Bossio.

Undertaking dated November 2, 2007:

Defendants’ Position:

86On November 2, 2007, an Undertaking was given by Mr. Bossio to Mr. Kyser and to NUTOK, documenting the November 2, 2007, loan of $25,000. The loan was to be used by Mr. Bossio to cover legal fees incurred defending a fraud charge, which was eventually resolved. As part of the Undertaking, Mr. Bossio undertook to place a third mortgage against the Madoc Lands in favour of Mr. Kyser.

Plaintiff’s Position:

87Mr. Bossio acknowledges that he signed the Undertaking, that he signed the promissory note, and that he received these monies.

Analysis:

88Mr. Bossio’s evidence is that he needed these monies for legal fees to deal with a fraud action. Mr. Bossio gave an Undertaking to Mr. Kyser and NUTOK, dated November 2, 2007, documenting a further advance of $25,000. In consideration, a new mortgage was to be registered against the Madoc Lands securing all of the promissory notes to the date thereof, as well as any and all other indebtedness of Mr. Bossio to either Mr. Kyser or NUTOK. According to Mr. Bossio, the fraud charges were ultimately dropped.

89The evidence indicates that Mr. Bossio received the $25,000, but did not provide the third mortgage pursuant to his Undertaking. Paragraph two of the Undertaking reads as follows:

The undersigned shall forthwith instruct Bailey, Yarrow to register a mortgage and charge against the above mentioned lands in favour of Wolfgang H. Kyser which change shall secure all of the promissory notes to the date hereof as well as any and all other indebtedness of the undersigned to either of you.

90Paragraph four of the Undertaking reads as follows:

The undersigned acknowledges that a payment plan must be implemented forthwith, the intent being that at least 50% of the outstanding balance be paid by January 15, 2008.

91The evidence was that no payment plan was ever implemented in accordance with paragraph four of the Undertaking.

92Paragraph five of the Undertaking also required Mr. Bossio to obtain commitments from Mark Valentine. There is no evidence that this was done.

93The Court finds that Mr. Bossio signed the Undertaking and received the $25,000, but did not comply with the Undertaking to: (i) implement a payment plan; (ii) put a third mortgage on the Madoc Lands; or, (iii) obtain the commitments from Mr. Valentine.

January 12, 2009 Loan:

Defendants’ Position:

94On January 12, 2009, a loan was taken by Mr. Bossio from Mr. Kyser, and documented by way of a promissory note. The principal amount of the loan was $15,000, bearing interest at the rate of 10% per annum, calculated and payable monthly. The loan was due on demand.

Plaintiff’s Position:

95Mr. Bossio testified that the purpose of this loan was to complete his home. He acknowledged that he signed this promissory note, and that the funds were advanced.

Analysis:

96Based on the evidence the Court finds that that this loan was received by Mr. Bossio.

February 10, 2009 Loan:

Defendants’ Position:

97On February 10, 2009, a loan was taken by Mr. Bossio from Mr. Kyser, and documented by way of a promissory note. The principal amount of the loan was $10,000, bearing interest at the rate of 10% per annum. The loan was due on demand. Mr. Kyser’s evidence is that the funds were advanced.

Plaintiff’s Position:

98Mr. Bossio testified that he signed the promissory note, but did not receive these monies.

Analysis:

99The parties agree that this promissory note was signed. Mr. Kyser says that the funds were advanced as the promissory note states “for value received.” Mr. Bossio denies receiving the funds.

100The Court prefers Mr. Kyser’s evidence that the funds were advanced. Mr. Kyser produced a cheque from Ironwood Lane Holdings Inc. payable to Mr. Kyser for $10,000, dated February 20, 2009. According to Mr. Kyser, Mr. Bossio gave him the cheque when he got the $10,000 loan or shortly thereafter. Mr. Bossio allegedly asked him not to cash the cheque because it would bounce. If Mr. Bossio had not received the $10,000 for the aforesaid promissory note, then why would Mr. Bossio give Mr. Kyser the Ironwood cheque for $10,000, which was signed by Mr. Bossio’s spouse, Ms. Choi? The only logical explanation is that Mr. Bossio received the funds from Mr. Kyser and provided the Ironwood cheque as the proposed payment, with interest to be paid separately.

Issue #2: Did Mr. Bossio Repay Any of the Borrowed Monies?

101The following chart provides an overview of alleged repayments by Mr. Bossio to the Defendant Group.

Date

Item

Amount & Interest

Relevant Facts

November 17, 2004

Payment from Bossio to Kyser

$100,000

Disputed between the parties

Unknown date in 2004-2005

Payment from Bossio (sent from BOTB by Cameron Chell) to Kyser

$150,000

Disputed between the parties

March 31, 2005

Payment from Bossio to Kyser

$75,500 USD

Disputed between the parties

102In order to address this issue, the Court must first deal with the issue of the Xtra Gold shares.

The Xtra Gold Loan and Xtra Gold Shares:

103As set out previously, on January 30, 2004, Mr. Bossio borrowed $17,500 USD from Mr. Kyser, documented by way of a promissory note, with an interest rate of 8% per annum, due on demand (the “Xtra Gold Loan”).

104The Xtra Gold Loan was made pursuant to a Memorandum of Agreement, dated January 30, 2004, between Mr. Kyser and Mr. Bossio. As per the Memorandum of Agreement: Mr. Kyser provided Mr. Bossio with $35,000 USD to purchase 100,000 shares in Xtra Gold, at a price of 0.35 US per share, to be deposited into Mr. Bossio’s account with Haywood Securities. Mr. Bossio was to hold the shares in trust for himself and Mr. Kyser. Specifically, the agreement provided that Mr. Bossio would purchase 50,000 shares for himself and that the additional $17,500 was to be used to purchase 50,000 shares in trust for Mr. Kyser. When the shares were sold, Mr. Bossio was to repay the initial investment of $35,000, pay the interest on the $17,500 USD loan at 8% per annum together with a deemed return of 8% to Mr. Kyser, and the balance of the proceeds were to be shared equally.

105Mr. Bossio signed a Declaration of Trust dated January 30, 2004, which clarified that Mr. Bossio was only to deal with the shares after receiving written instructions from Mr. Kyser.

106Despite the existence of the Declaration of Trust, Mr. Bossio sold all of the Xtra Gold shares in 2006 or 2007, without requesting Mr. Kyser’s written or verbal authorization to do so.

107Mr. Kyser’s evidence is that he was not informed of the sale of the Xtra Gold shares until sometime in late 2008. Mr. Kyser never received any proceeds from the sale of his shares.

108When the insurance proceeds from the fire were received on November 15, 2008, Mr. Kyser used part of the proceeds to repay the Xtra Gold loan.

109Mr. Kyser provided a fax, dated September 8, 2008, as evidence of his lack of knowledge of the sale of his Xtra Gold shares. In the fax, Mr. Kyser communicated with Mr. Bossio instructing him to “either sell my Xtra Gold with monies to pay off in accordance with the agreement or transfer to my account.”

Plaintiff’s Position:

110Mr. Bossio claims that on March 31, 2005, he repaid Mr. Kyser $75,000 USD for the Xtra Gold transaction and some other loans. Mr. Bossio’s evidence is that on March 31, 2005, $75,500 USD was transferred to Mr. Kyser’s Royal Bank of Canada account in Toronto, from an account of Mr. Bossio’s in the Cayman Islands.

111Mr. Bossio says he repaid the $75,500 USD in relation to the Xtra Gold shares transaction, with monies being directed as follows:

a) $17,500 – to re-pay his loan from Mr. Kyser;

b) $2,750 – as interest on the above loan;

c) $17,500 – to buy Mr. Kyser’s Xtra Gold shares;

d) $37,750 – which was a surplus to Mr. Bossio’s credit to be applied to his other outstanding debts.

Defendants’ Position:

112Mr. Kyser argues that the Xtra Gold promissory note and the Declaration of Trust clearly set out the intention of the parties with respect the Xtra Gold shares. Mr. Bossio did not comply with those agreements.

113Mr. Kyser submitted a calculation, prepared by his bookkeeper and his broker, using November 15, 2008, as the date to determine the price of the shares. On November 15, 2008, the shares were valued at $1.25 USD per share. This amounts to a total of $62,500 USD (for 50,000 shares) or $68,750 CAD at a $1.10 exchange rate.

114Mr. Kyser acknowledges that, although he calculated the sale proceeds of the shares using the date of November 15, 2008, the shares were not sold on that date. Mr. Bossio’s evidence is that they were sold in 2006 and 2007.

115Mr. Kyser claims the balance of the $17,500 USD loan together with interest, which he calculates to be valued at $28,212.60 USD, as of November 15, 2008.

116Mr. Kyser is not claiming the lost opportunity cost or the 8% deemed return to him.

117Mr. Kyser’s position regarding the March 31, 2005, transfer is that these monies had nothing to do with the Xtra Gold transaction, but rather it was in relation to a transaction for Swiss Medica (which he and Mr. Bossio were also involved with). Mr. Kyser says that the $75,500 USD was put into Mr. Kyser and Mr. Bossio’s joint account in the Cayman Islands, and then transferred to Mr. Kyser’s account on Mr. Kyser’s instructions, not on Mr. Bossio’s instructions.

Analysis:

118There is no dispute that Mr. Bossio received a $17,500 USD loan from Mr. Kyser for the purchase of Mr. Bossio’s Xtra Gold shares, together with another $17,500 USD to be used for the purchase of Mr. Kyser’s shares. These monies were transferred from Mr. Kyser’s brokerage account in the Cayman Islands to Haywood Securities Inc.

119It is clear from the promissory note and Declaration of Trust that Mr. Bossio was aware that he was only the owner of 50,000 Xtra Gold shares, and that Mr. Kyser was the owner of the other 50,000 Xtra Gold shares. The 100,000 shares were purchased by Mr. Bossio with 50,000 for himself, and 50,000 in trust for Mr. Kyser.

120The Xtra Gold shares were purchased for $0.35 USD per share.

121The evidence is that Mr. Bossio sold the Xtra Gold shares belonging to both himself and Mr. Kyser over a period of time between 2006 and 2007, without Mr. Kyser’s knowledge or consent.

122Mr. Kyser’s bookkeeper and his broker prepared an arbitrary calculation that the shares were sold as of November 15, 2008, for $1.25 USD per share, for a total of $62,500 USD or $68,750 CAD at a $1.10 exchange rate.

123Mr. Bossio’s evidence, based on the broker’s records, is that the total share price actually received for the 100,000 Xtra Gold shares was $74,867.80 USD or $0.748 USD per share. The equivalent is $82,384.58 CAD, based on a conversion rate of $1.10 as of November 15, 2008.

124According to the Court’s calculations, Mr. Kyser’s calculation of the share value was about $0.50 per share higher than the actual sale price (i.e. $1.25 per share vs. $0.748 per share) for a difference of about $25,000 USD.

125This Court finds it appropriate to use Mr. Bossio’s share value. As such, Mr. Kyser’s claim for half of the share proceeds would amount to $41,177.29 CAD.

126As to the argument by Mr. Bossio that he paid $75,500 USD to Mr. Kyser on account of the Xtra Gold shares transaction with the surplus to be applied to his loans, Mr. Bossio’s position is not believable for a number of reasons.

127First, according to this Court’s calculations, the amounts owing by Mr. Bossio in March 2005 were: $25,000 plus interest to NUTOK, and $17,500 USD for the Xtra Gold loan. The total is approximately $42,500, plus the exchange rate on $17,500 USD.

128The Xtra Gold loan was exclusively with Mr. Kyser. Therefore at March 31, 2005, the only amounts owing by Mr. Bossio to Mr. Kyser would have been $17,500 USD plus interest.

129It is not logical that a sophisticated business person, like Mr. Bossio, would overpay his debt to Mr. Kyser by approximately $60,000 USD.

130Second, a fax was sent from Mr. Kyser to Mr. Bossio on September 8, 2008. Page one of the fax shows that it is four pages in length. Only page one was produced. Neither of the parties produced the other three pages or knew what was on the other three pages.

131In the fax Mr. Kyser says, “[w]e have to discuss an agreement which will be adhered to. Further, either sell Xtra Gold with monies to pay off in accordance with the agreement or transfer to my account.”

132The Court finds that fax is sufficient to show that Mr. Kyser was unaware of the sale of his Xtra Gold shares, as alleged by Mr. Bossio, in 2006 or 2007.

133Lastly, the evidence indicates that Mr. Bossio made a profit on the sale of the Xtra Gold shares, which also included Mr. Kyser’s shares. Mr. Bossio’s repayment breakdown, as set out in a previous paragraph, does not give Mr. Kyser any share of the profits, notwithstanding the fact that there was a profit accrued on Mr. Kyser’s shares. Mr. Bossio’s breakdown indicates that he kept all the profits for himself, unilaterally purchasing Mr. Kyser’s shares at $0.35 per share.

134Mr. Bossio’s position lacks credibility. Furthermore, Mr. Bossio’s behaviour with respect to the unilateral pricing of Mr. Kyser’s shares at $0.35 per share is totally unacceptable.

135Therefore, the Court finds that Mr. Bossio did not repay $75,500 USD to Mr. Kyser on account of the Xtra Gold shares.

136As Mr. Kyser was never paid for his portion of the shares, he is entitled to his share of the profits. The Court finds that Mr. Kyser is entitled to $0.748 USD per share for his 50,000 shares. This means that Mr. Kyser is owed $37,400 USD from the sale of his Xtra Gold shares.

137In summary, Mr. Bossio owes Mr. Kyser the following amounts from the sale proceeds of the shares pursuant to the agreement:

a) Repayment of loan – $17,500 USD, subject to it being statute barred;

b) Interest on $17,500 USD at 8% from January 30, 2004, to February 28, 2015, ($9.22 per day) totalling $24,848.20 USD;

c) Sale of 50,000 shares at $0.748 totalling $37,400 USD.

Repayment of $100,000 on November 17, 2004 by Mr. Bossio:

Plaintiff’s Position:

138Mr. Bossio argues that he paid $100,000 to Mr. Kyser on November 17, 2004, as payment with respect to the mortgages. Mr. Bossio was unable to provide any documentary evidence of: (i) the $100,000 being paid; (ii) it being paid in relation to the mortgages; or, (iii) the date of the payment.

Defendants’ Position:

139Mr. Kyser acknowledges that he received a $100,000 transfer; however, he claims it was with respect to an investment in Global Path Inc., and was not related to the mortgages. He argues that as of November 17, 2004, only $25,000 owed on the NUTOK mortgage; therefore, it is not logical that Mr. Bossio would overpay by such a significant amount.

Analysis:

140It is clear that as of November 14, 2004, the only amounts that were outstanding to NUTOK with respect to the mortgage was the $25,000 plus interest. It is not logical that a sophisticated businessman, like Mr. Bossio, would overpay his debt to NUTOK by approximately $70,000 to $75,000.

141Therefore, the Court finds that Mr. Bossio’s claim that he paid a $100,000 on November 17, 2004, is untrue.

Repayment of $150,000 by BOTB for Mr. Bossio’s Debts to the Defendant Group:

Plaintiff’s Position:

142Mr. Bossio testified that he had Mr. Chell send $150,000 from BOTB on an unknown date to Mr. Kyser on account of his mortgage debt. Mr. Bossio provided no documentation to support this position.

Defendants’ Position:

143Mr. Kyser testified that he did not receive the $150,000 from BOTB and had no records of such monies ever being received.

Analysis:

144Mr. Bossio’s evidence is that, on his instructions, Mr. Chell sent $150,000 to Mr. Kyser. Mr. Chell testified that his company, BOTB, sent $150,000 to Mr. Kyser between April and September 2004. He testified that he did not know why the monies were being sent to Mr. Kyser and that he had no knowledge of the mortgages between Mr. Bossio and Mr. Kyser or his companies. Mr. Chell had no records, emails or notes to confirm that the transaction had occurred.

145Mr. Chell testified that his memory was affected during this time because of alcohol and cocaine abuse. He filed for bankruptcy in 2005 or 2006.

146At the time of the alleged $150,000 payment, Mr. Bossio owed NUTOK approximately $25,000 plus interest, and Mr. Kyser $17,500 USD plus interest.

147Again, it is not logical that is sophisticated business person like Mr. Bossio would over pay his debt to Mr. Kyser and/or NUTOK by in excess of $100,000.

148Based on the aforesaid, the Court finds that the $150,000 was not forwarded to Mr. Kyser or to NUTOK, on behalf of Mr. Bossio.

149The Court notes that based on the evidence given at trial Mr. Bossio and Mr. Kyser were involved in many deals together along with the following companies: Xtra Gold, Global Path Inc., Swiss Medica, Acico, Nexus International, BPS, BOTB, Tech Income Limited Partnership and Net Net Net.TV. The lack of documentation provided by Mr. Bossio is an indication that the monies he alleges he paid to Mr. Kyser via BOTB could have been transferred for any of these other investments, companies, or transactions, as opposed to the transactions in question.

150Overall, this Court agrees with the position taken by the Defendant Group. The Defendant Group has succinctly put forward that if Mr. Bossio is to be believed, then by January 1, 2005, Mr. Bossio would have forwarded $300,000 to Mr. Kyser to pay off debts, which amounts a fraction of what Mr. Bossio allegedly owed at the time. As of December 2003, Mr. Bossio had borrowed $25,000 from NUTOK, $6,000 in January 30, 2004, and $17,500 USD for the Xtra Gold shares. Why would Mr. Bossio pay Mr. Kyser $300,000 when he owed Mr. Kyser less than $60,000? The Court finds that he would not, and his alleged re-payments never occurred.

Issue #3: Did Mr. Kyser Apply the Insurance Proceeds Properly when He Applied Them to Unsecured Loans as Opposed to the Mortgages?

Plaintiff’s Position:

151Mr. Bossio argues that the $200,000 in fire insurance proceeds was supposed to be applied against the two mortgages. The mortgagees, KUL and NUTOK, were entitled to those proceeds by virtue of the loss payee clause contained in the insurance policy. Mr. Bossio testified that it was his understanding that after the $200,000 was applied to the mortgages, he would owe only the outstanding mortgage balance, over and above the $200,000.

152Mr. Bossio argues that if the $200,000 of insurance proceeds had been applied to the two mortgages, the NUTOK mortgage would have been paid off in full and that a portion of the KUL mortgage would also have been paid off.

153Mr. Bossio argues that the only support for the Defendant Group’s position is a self-serving direction by Mr. Kyser on behalf of NUTOK and KUL to himself. That direction was unsigned by Mr. Bossio.

154Mr. Bossio argues that as of March 1, 2005, no monies were owing to either Mr. Kyser or NUTOK when the alleged $75,500 USD (discussed in relation to Xtra Gold above) was received by Mr. Kyser from Mr. Bossio.

Defendants’ Position:

155The Defendant Group argues that Mr. Kyser had the right to apply the insurance proceeds towards the promissory notes because the evidence demonstrates that Mr. Kyser, on behalf of NUTOK and KUL, and Mr. Bossio came to an agreement that:

i. NUTOK and KUL would retain the security for the outstanding loans;

ii. a portion of the insurance proceeds would be given to Mr. Bossio to rebuild; and,

iii. a portion of the insurance proceeds would be applied against the unsecured debts.

156The Defendant Group argues that the Authorization and Direction to the Bay of Quinte, dated October 2008, together with emails between Mr. Bossio and Mr. Kyser, show that there was an agreement between Mr. Bossio and Mr. Kyser that the NUTOK and KUL insurance proceeds would go to Mr. Kyser for debts other than the mortgages. The Court notes that the day of the month in October 2008 was blank in the Authorization and Direction.

157The Defendant Group submits that a mortgagee is entitled to use insurance proceeds in any way it sees fit, subject to an agreement (See: Mortgages Act, R.S.O. 1990, Chapter M. 40, s. 6(2)). The mortgagee can receive and use the proceeds, or can maintain the proceeds as collateral for the full payment of the mortgage.

158The Defendant Group relies on the case of Edmonds v. Hamilton Provident and Loan Security (1891), 180 A.R. 347. At paragraph 14 of that decision the Court stated:

I think the statute does not apply to a case in which the mortgagee receives the insurance money, and he has still the legal right to say, I hold this money as I held the policy, as collateral or additional security for the sum secured by the mortgage, and I intend so to hold it. He was not bound to apply it, in my judgment, to any part of the principal sum so secured, because it happened to be due, much less to the payment of over due interest.

159At paragraph 53 the Court stated:

In effect the option given by the section is either to have the money applied in rebuilding or to have it at once applied in reducing the debt secured by the mortgage. If the latter option is not exercised the money remains in the mortgagee’s hands (in those cases in which he has had, apart from the statute, the right to receive it) as it would have done before the Act, and subject to whatever rights or interests the parties by law respectively had therein, and inter alia to the right of the mortgagee to make such application of it as he might deem proper to the payment either of principal or of interest, or of both, overdue, or to make no application of it if he should deem it more advisable for the security of his contract not to adopt that course, but to require the mortgagor to make his payments in accordance with his covenants.

Analysis:

160The parties agree that the insurance proceeds totalled $375,500. Of the proceeds, $175,500 was given to Mr. Bossio to rebuild his house and $200,000 was given to Mr. Kyser in trust.

161Both Mr. Kyser and Mr. Bossio state that an agreement was reached as to the $200,000 of insurance proceeds, but each person’s version of the agreement is different. The key disagreement between the parties is with regards to how the $200,000 should have been used by NUTOK and KUL. Mr. Bossio argues that it should have been applied towards the outstanding mortgages, while Mr. Kyser argues that it was rightfully applied towards the outstanding unsecured debts.

162Section 6(2) of the Mortgage Act set sets out a mortgagee’s right to deal with insurance proceeds. The provision reads:

Without prejudice to any obligation to the contrary imposed by law or by special contract, a mortgagee may require that all money received on an insurance of the mortgaged property be applied in or towards the discharge of the money due under the mortgagee’s mortgage.

163Mr. Kyser is, in effect, claiming that he applied the monies in a way that was consistent with his obligation to apply the insurance proceeds in accordance with their existing agreement or contract.

Emails and Fax

164Mr. Kyser points to several emails between Mr. Kyser and Mr. Bossio in support of an agreement having been reached between the parties. In one of the e‑mails used to support this position, Mr. Kyser clearly says, “… we have to discuss an agreement that will be adhered to.” This Court finds that this email is not indicative of an actual agreement, rather it clearly points to a request for discussion of a potential agreement.

165Mr. Kyser also points to a fax sent to Mr. Bossio on September 8, 2008, stating “[w]e have to discuss an agreement which will be adhered to. Further, either sell Xtra Gold with monies to pay off in accordance with the agreement or transfer to my account.” The Court finds that the information contained in the fax is also not satisfactory evidence of any agreement regarding the disposition of the insurance proceeds.

166Based on the evidentiary record, or lack thereof, the Court does not find that there was an agreement (based on the emails and fax) to have the insurance proceeds directed to Mr. Kyser, for payment in a manner solely determined by him.

Authorization and Direction

167Mr. Kyser also points to the Authorization and Direction given to the insurance company in support of his position that he was entitled to apply the insurance proceeds as he saw fit. This document, he submits, is a special contract directing how the insurance proceeds were to be applied.

168The Court notes that the Authorization and Direction was signed by NUTOK, via Mr. Kyser as president, and KUL, via Mr. Kyser as director. It was not signed by Mr. Bossio.

169The Authorization and Direction reads as follows:

“Whereas S. Bossio has a claim resulting from a fire which occurred in May 2008 (the “Loss”) and the undersigned are loss payees under mortgages held by them and are entitled to proceeds from the Policy.

The undersigned hereby authorize and direct you to make $200,000 of the proceeds from the Policy payable to Wolfgang H. Kyser in trust and this shall be your good and sufficient authority for doing.

Upon payment of the said $200,000 as aforesaid the undersigned release any and all entitlement to proceeds of the Policy relating to the Loss but shall continue to be loss payees under the existing insurance policy”.

170According to this Authorization and Direction, the two companies authorized the proceeds to be made payable to Mr. Kyser, in trust.

171The Defendant Group submits that, because there was no argument from Mr. Bossio from November 2008 to June 2010 regarding the application of the insurance proceeds, Mr. Bossio – presumably – agreed.

172However, the Court notes that when Mr. Kyser, acting on behalf of NUTOK and KUL, provided the Authorization and Direction to Mr. Bossio, Mr. Kyser, in effect, had Mr. Bossio over a barrel. Mr. Kyser acted inequitably in applying pressure to Mr. Bossio, in order to allow Mr. Kyser to apply the $200,000 insurance proceeds to the unsecured debts, while maintaining the companies’ secured interests as loss payee. This is further evidenced by the fact that the Authorization and Direction, as signed by Mr. Kyser, is totally self‑serving.

173The Court suspects that Mr. Bossio would not sign the Authorization and Direction because he did not want the insurance proceeds to be applied to the unsecured loans.

174The Authorization and Direction provided that once the $200,000 was paid, NUTOK and KUL would release any and all entitlement to these proceeds, but continue to be loss payees under the insurance policy. It would be inequitable for KUL and NUTOK to obtain a portion of their unsecured debts via the insurance payout, and at the same time, maintain the full security interests as the mortgagees via the loss payee clause.

175Mr. Kyser testified that he had never read a “loss payee clause” in a mortgage or insurance contract. The Court does not find that evidence to be credible, since Mr. Kyser had been a longstanding real estate lawyer with extensive experience working for a real estate company.

176Having found that there was no agreement between the parties that would be prejudiced by the Defendant Group’s use of the $200,000 insurance proceeds, the Court must now determine whether the proceeds were otherwise applied appropriately within the meaning of s. 6(2) of the Mortgages Act.

Section 6(2) of the Mortgages Act

177As a starting point, it is worth noting that under the Mortgages Act, a mortgage includes: “any charge on any property for securing money or money’s worth” (See: Mortgages Act, R.S.O. 1990, Chapter M. 40, s. 1). Moreover, loss payees are mortgagees within the meaning of the Act. As indicated by the Court in Doblay Investments Ltd. v. Amrit Investments Ltd. (1977), 1977 CanLII 1403 (ON SC), 15 O.R. (2d) 584, “[a]t law, moreover, a covenant to insure in a mortgage, together with a direction in a policy to make a loss payable to the mortgagee, operates as an equitable assignment of the policy to the mortgagee to the extent of the mortgagee’s interest.” The case law is clear that a mortgagee has the right to elect how the proceeds of the insurance policy on the mortgaged premises are to be applied to the extent of their interest (See: Midland Loan and Savings Co. v. Genitti, 1916 CanLII 457 (ON SC), 1916 CarswellOnt 340, 30 D.L.R. 52; Scott v. Crinnian Scott v. Crinnian, 1918 CanLII 441 (ON SC), 1918 CarswellOnt 103, 43 O.L.R. 430; and Horizon Holidays of Canada Ltd. v. Commercial Union Assurance Co. of Canada, 1992 CarswellOnt 155, [1992] O.J. No. 2830).

178While the Defendant Group submits that, as a loss payee, they were entitled to use insurance proceeds as they “saw fit,” the Court finds that what the Defendant Group was entitled to do with the monies is more constrained than this. In particular, a mortgagee can: permit the mortgagor to rebuild, require the mortgagor to apply the proceeds to repair the loss or damages, require the insurance monies be held as collateral security for the repayment of mortgage debt, and/or require the insurance monies be applied to the discharge of monies due under the mortgage debt (See: Falconbridge on Mortgages, edited by Walter Traub, (5th ed: Toronto, Release No. 16, December 2014) at p. 38-19) [Emphasis added]. While the mortgagee is not bound to apply insurance proceeds towards the payment of either the principal or overdue interest, where a mortgagee accepts the monies and uses them, it is in payment of the monies due and owing under the mortgage debt. The mortgagee cannot recover the monies, apply them to unsecured debts, and still come to the Court asking to maintain his position as a secured creditor. This type of double recovery is not permissible. To be clear, the issue is not that that the funds were improperly applied; once a mortgagee receives payment discharging a mortgage debt it is not the Court’s business what the mortgagee does with those monies. Rather, the issue in this case arises because the mortgagee received payments that would otherwise discharge the mortgage, used them to pay other unsecured debts and other things (i.e.: Xtra Gold share transaction) owing by the mortgagor to the mortgagee, while still hoping to maintain their secured status as mortgagees on the secured debts.

179In other words, NUTOK and KUL were the loss payees under the insurance; Mr. Kyser was the operating mind of these corporations. In accepting the insurance proceeds (and not holding them as collateral or using them to pay off the principal or interest owing under the mortgage), NUTOK and KUL received the insurance monies in partial satisfaction of Mr. Bossio’s mortgage debt. The Defendant Group was entitled to use and apply the monies as they saw fit, however, they cannot also look to Mr. Bossio for the amounts they have already recovered from him. It would be NUTOK and KUL that could take issue with how Mr. Kyser applied the money, not Mr. Bossio, as it was Mr. Kyser’s choice to apply NUTOK and KUL’s insurance monies to unsecured debts and other items, including Xtra Gold, to the detriment of the companies’ secured interests.

180In conclusion, the mortgagees could not accept the $200,000 in insurance proceeds to satisfy a portion of the monies owed under the mortgage, then use the $200,000 to pay down unsecured debts, and then try to enforce the full amount of the mortgage debts against the mortgagor. To allow the mortgagees to act in such a manner would be to allow double recovery of the secured debts.

181According to the Court’s calculations, which are attached in the Appendices at the end of this decision, the balance owing on the NUTOK Mortgage as of November 15, 2008, was $154,662.81. Applying the insurance proceeds to discharge the mortgage debt as of that date, the entire mortgage would have been paid in full.

182According to the Court’s calculations, which are in the Appendices at the end of this decision, the balance owing on the KUL Mortgage as of November 15, 2008, was $135,493.89. Applying the balance of the insurance proceeds as of that date of $45,337.19, there remains a balance owing of $90,158.70. That remaining mortgage balance accrues interest at the rate of 12% per annum, calculated monthly to the date of payment.

183Therefore, the $200,000 received by Mr. Kyser on behalf of NUTOK discharges the NUTOK mortgage debt in full. The portion of the KUL mortgage outstanding, over and above the $200,000, remains owing.

Issue #4: Did the Defendant Group Provide a Proper Accounting to Mr. Bossio for Monies Claimed to be Due and Owing?

Defendants’ Position:

184Mr. Kyser argues that Mr. Bossio received a copy of the formal accounting in 2008. Mr. Kyser also stated that he met with Ms. Choi (Mr. Bossio’s spouse) sometime in 2008, who confirmed that Mr. Bossio was aware of all the monies owing. Mr. Kyser claims that Ms. Choi kept track of all the principal amounts owing in a book, however, this book was not produced at trial.

185Mr. Kyser testified that the two power of sale documents issued by KUL and NUTOK, as prepared by Graham Tobe Professional Corporation, also contained an accurate accounting of what was owing.

186Mr. Kyser also argues that a letter from himself to Mr. Andrew McLachlin, dated May 13, 2009, is a further accounting.

Plaintiff’s Position:

187The Plaintiff’s position is that he never received an accounting of what was due and owing on his debts until after the fire insurance proceeds had been attributed to the various unsecured loans and the Xtra Gold shares. He said that this was not a true accounting, but rather a statement of what was due.

188Mr. Bossio says that the mortgage accounting calculations contain errors, particularly since the NUTOK mortgage should have been paid out of the insurance proceeds, together with part of the KUL mortgage.

Analysis:

189The Court finds that there are numerous problems with Mr. Kyser’s documents tracking the money lent to Mr. Bossio. Some examples include:

• There is no acknowledgement signed by Mr. Bossio, as alleged by Mr. Kyser, that the insurance proceeds of $200,000 were to be applied to the unsecured debts;

• There are differing interest rates for the July 7, 2004, loan which bears interest at 18%. The loan is part of the NUTOK mortgage which bears interest at 12%;

• There are differing interest free dates for the NUTOK mortgage;

• There is an error in the Memorandum of Agreement, dated July 7, 2005. In the second recital, it says that $6,000 and $5,000 were advanced without interest, when in fact, they were advanced with interest.

• Mr. Kyser’s Receipt and Acknowledgement, dated November 15, 2008, records a loan to Mr. Bossio of $5,000 on September 18, 2003. However, during trial, the same $5,000 was acknowledged to be consolidated into the first advance under the NUTOK mortgage. Therefore, Mr. Kyser is claiming the $5,000 twice: once in accordance with a separate promissory note, and again under the NUTOK mortgage;

• The interest calculation for the NUTOK power of sale calculates interest from April 12, 2004 (on the full amount of the mortgage), despite the fact that three fourths of the mortgage was not advanced until July 2005;

• The interest calculation for the KUL power of sale amounts calculates interest as of February 6, 2006; notwithstanding the fact that the mortgage was advanced in four tranches between January 2006 and April 2006. Moreover, the last tranche deducted $2,122.52 for interest charges on prior advances, which is also not taken into account;

• Mr. Kyser testified that he knew there were problems with calculations in Mr. Tobe’s demand letter, but he did not try to correct those errors;

• In the Acknowledgement and Receipt dated November 15, 2008, Mr. Kyser’s records show $106,962.14 from the insurance proceeds was directed to the repayment of seven unsecured loans. This conflicts with paragraph five of the Statement of Defence, which states that only six unsecured loans were repaid; and,

• No documents, bank statements or cancelled cheques for the advances made by Mr. Kyser were produced. There has been no explanation by Mr. Kyser as to why they were not produced.

190The Court notes that, while testifying, Mr. Kyser pulled documents out of his briefcase trying to provide them to the Court. The Court refused them, as they should have been produced a long time prior to the trial itself.

191At trial, the Defendant Group argued that a letter from Mr. Kyser to Andrew McLachlin, dated May 13, 2009, is an accounting of the monies due and owing to NUTOK and KUL.

192Having reviewed the letter, the Court finds that it is merely a statement of the amounts owing as of April 30, 2009. No breakdown is provided.

193At trial, Mr. Kyser acknowledged that there were arithmetic errors in the calculations of the amounts due and owing in the power of sale documents. While Mr. Kyser testified that he read the Statement of Defence and Counterclaim before it was issued, Mr. Kyser did not notify his counsel or the opposing party.

194Mr. Kyser also acknowledged the error in the Statement of Defence and Counterclaim regarding the interest owing on the KUL mortgage. However, Mr. Kyser never recalculated the interest amounts on either the NUTOK or the KUL mortgage at the correct rates. In fact, by the time of trial, Mr. Kyser still had not determined the correct interest amounts owing.

195The Defendant Group submits that the interest calculations are minor errors.

196The Court disagrees, and finds that the aforesaid errors are major errors. Mr. Kyser has not properly documented what has been loaned, and has consistently miscalculated the amounts owing.

197Therefore, the Court finds that Mr. Bossio has not been provided with an accurate accounting of the monies owing.

Issue #5: Are the Power of Sale Proceedings Valid in Relation to the Monies Owing to NUTOK and KUL?

Plaintiff’s Position:

198Mr. Bossio seeks an interim & permanent injunction against NUTOK and KUL in relation to the NUTOK and KUL power of sale proceedings. He claims that the accounting provided in relation to each power of sale is inaccurate, and, therefore, not valid. Further, as discussed above, Mr. Bossio claims that the insurance proceeds should have been applied to the NUTOK and KUL mortgages.

Defendants’ Position:

199The Defendant Group argues that the power of sale proceedings in favour of NUTOK and KUL are valid, and that the Defendant Group should be allowed to act on them without delay.

Analysis:

200According to Mr. Kyser, the purported accounting for the NUTOK mortgage was completed by his marital partner and accountant, Ms. Hosseinz. During trial Mr. Kyser acknowledged that Ms. Hosseinz was a bookkeeper, who was training to be an accountant at the time of preparing the mortgage statements. Therefore, the Court does not accept that she was an accountant during the relevant time.

201Mr. Kyser testified that when he received the Statement of Defence and Counterclaim from his counsel, he was aware that there were errors in the amounts. But again, he took no steps to have the correct amounts included in the aforesaid documents.

202The law has held that where the notice of sale misstates the amount of principal owing, the power of sale notice is invalid.

203In the case of Grenville Goodwin Ltd. v. MacDonald, (1988) 65 O.R. (3d) 381 (ON C.A.), Zuber J.A.A, wrote at para 6 and 7:

The notice given pursuant to s. 30 of the Mortgages Act must accurately state the amounts due in order that the mortgagor or, indeed, subsequent encumbrancers may intelligently assess their position with respect to redemption of the mortgage. In Re Botiuk and Collison (1979), 1979 CanLII 2060 (ON CA), 26 O.R. (2d) 580 at p. 589, 103 D.L.R. (3d) 322, 11 R.P.R. 39 (C.A.), Wilson J.A. (as she then was), writing for the majority stated:

I think that the statutory conditions under which a power of sale contained in a mortgage may be exercised must be strictly complied with. They are there for the benefit of the defaulting mortgagor and they are requirements imposed by the Legislature on the exercise by the mortgagee of a self-help remedy.

This is not a case of an inadvertent minor variance that might be excused by the operation of s. 27(d) of the Interpretation Act, R.S.O. 1980, c. 219. The amount claimed to be due is overstated by $221,331.43. Nor is this a case where a mortgagee has a reasonable basis upon which to claim that an amount is due and that amount may be shown to be in error in a subsequent accounting: see Toronto-Dominion Bank v. Pallet Developments Ltd. (1984), 1984 CanLII 3009 (ON SCDC), 47 O.R. (2d) 251, 11 D.L.R. (4th) 91 (Div. Ct.).

204As this Court has found that the fire insurance proceeds paid out the NUTOK mortgage debt in full, the Court finds that there is nothing owing against the NUTOK mortgage after November 15, 2008. As such the NUTOK power of sale proceedings is invalid.

205The fire insurance proceeds would have also discharged a portion of the KUL mortgage. The mortgage principal is overstated by more than $20,000. The amount claimed in the power of sale documents is incorrect. The Court finds that this is a major misstatement of the balance owing. As such, the Court finds that the KUL power of sale proceedings is also invalid.

206In conclusion, the Court finds that the Power of Sale notices issued by NUTOK and KUL are not valid or enforceable against Mr. Bossio and/or the Madoc Lands.

207Based on the finding of the invalidity of the two Power of Sale notices, this Court orders an interim and permanent injunction restraining the Defendant NUTOK from taking any steps to enforce its mortgage registered as Instrument No. QR641273. In addition, this Court orders that there be an injunction restraining the Defendant, KUL, from exercising its powers of sale contained in mortgage QR663875 for a period of 75 days, in order to allow the Plaintiff to refinance any amounts found due and owing to KUL.

Issue #6: Are any Amounts Claimed in this Action Statute Barred?

Plaintiff’s Position:

208Mr. Bossio argues that by November 15, 2008, when the $200,000 in insurance monies were received, a number of the loans documented in promissory notes and repaid by Mr. Kyser with the insurance monies would have been statute barred.

209Therefore, Mr. Bossio argues that Mr. Kyser found a way around the Limitations Act by paying off the unsecured debts first with the insurance proceeds and attempting to retain the secured debt, which has a ten year limitation period under the Limitations Act, 2002. S.O. 2002, CHAPTER 24. Schedule B.

210Mr. Bossio argues that if the mortgages (inclusive of interest) amounted to approximately $290,000 after paying the NUTOK mortgage and part of the KUL mortgage there would be $90,000 left owing to KUL.

211Mr. Bossio’s counsel claims that the NUTOK and KUL mortgages should have been paid off before the unsecured debt. He argues that the Undertaking dated November 2, 2007, signed by Mr. Bossio, suggests that payment of the outstanding indebtedness was demanded in the Undertaking. Paragraph number four of the Undertaking states, “The undersigned acknowledges that a payment plan must be implemented forthwith, the intent being that at least 50% of the outstanding balance be paid by January 15, 2008”.

212The Plaintiff argues that all of the loans documented in the promissory notes are statute barred, save and except for the loans dated January 12, 2009, and February 10, 2009.

Defendants’ Position:

213The Defendant Group argues that save and except for the November 2, 2005, loan, no other loans are statute barred.

214The Defendant Group argues that the limitation period for a demand obligation begins to run from the first day on which there is failure to perform the obligation, after a demand has been made.

215The Defendant Group argues that the Undertaking signed by Mr. Bossio on November 2, 2007, does not constitute a demand. They argue that the only document that constitutes a demand is the Counterclaim itself, and as a result, as per s. 5(3) of the Limitations Act, the demand for all outstanding promissory notes was made within the limitation period.

Analysis:

216In determining whether the promissory notes are statute barred, the Court must look to section 5(4) of the Limitations Act, S.O. 2002, Ch. 24, Sch. B, which states:

For the purposes of sub clause (1) (a) (i), the day on which injury, loss or damage occurs in relation to a demand obligation is the first day on which there is a failure to perform the obligation, once a demand for the performance is made [Emphasis added].

217In the case of Hare v. Hare, 2006 CanLII 41650 (ON. C.A.), the Court of Appeal considered the new discovery principal enumerated in s. 5(4) of the Limitations Act, as it applies to demands for repayment under a promissory note. In that case the respondent argued that the claim was discovered on the date the promissory note was made, while the appellant argued that the respondent’s refusal to comply with the demand letter gave rise to the claim, commencing the limitation period (Hare at paras 27-28).

218Despite the wording of the statute, the Court of Appeal stated, at para 50:

This concern, it seems to me, does not arise in the case of demand promissory notes. The law is well-settled that a lender has the right to immediate repayment of such loans. The face of the promissory note makes clear that the debtor owes money to the lender. As there is no repayment period specified, the lender is entitled to require immediate repayment. There is nothing to be discovered by the lender before he or she becomes aware of their claim. They know of their claim immediately on receipt of the demand promissory note.

219Contrary to the wording of the new statute, the Court reasoned, at para 39:

First, to accede to the appellant’s submission, I would have to accept that the legislature intended to change the law relating to demand notes by means of the new Limitations Act, a piece of legislation that is directed at limitation periods, not commercial law. In my view, it would require very clear language evidencing an intention on the part of the legislature to impair existing rights before such a construction, which would overturn centuries’ old jurisprudence, would be warranted. As the Supreme Court of Canada stated in Goodyear Tire and Rubber Co. of Canada v. T. Eaton Co., 1956 CanLII 2 (SCC), [1956] S.C.R. 610, [1956] S.C.J. No. 37, at p. 614 S.C.R.:

[A] Legislature is not presumed to depart from the general system of the law without expressing its intention to do so with irresistible clearness, failing which the law remains undisturbed.

In my view, the language in the new Limitations Act is not so "irresistibly clear" that it can be presumed that the legislature intended to depart from established commercial law and disturb existing common law rights.

220As such, Courts have held that a lender’s delivery of the demand commences the new limitation period, irrelevant of any failure to perform an obligation on the part of the borrower. (See: Fornasier v. Grills (2009), 206 A.C.W.S. (3d) 327, 82 B.L.R. (4th) 220 (Ont. S.C.), at paras 122-125; and Peca v. Peca, 2011 ONSC 770, 198 A.C.W.S. (3d) 994, at para 21).

221In looking to the present action, the Court finds that a demand was made to Mr. Bossio by Mr. Kyser and NUTOK for the repayment of monies owing to them in the Undertaking dated November 2, 2007. The Undertaking is signed by Mr. Bossio. The parties admitted that this Undertaking was drafted by and addressed to Mr. Kyser and to NUTOK and signed by Mr. Bossio. The relevant portions of the Undertaking are reproduced as follows:

In consideration of a further loan of $25,000.00 being made to the undersigned, the undersigned hereby agrees and undertakes as follows:

1. Any and all past, present and future indebtedness of the undersigned to either of you shall be secured by a mortgage over the following two parcels of land and buildings…

2. The undersigned acknowledges that a payment plan must be implemented forthwith, the intent being that at least 50% of the outstanding balance be paid by January 15, 2008.

222In determining whether a demand letter was sufficient in the case of Caisse Populaire Beausejour Ltee v. Wry, 2012 NBQB 234, 2012 CarswellNB 390, at para 23, the Court looked to Patrick McGuinness’ text, “The Law of Guarantee,” Second Edition, Carswell, at sections 6.26 and 6.27. In speaking to demands, the text reads:

6.26 …where the surety promises to pay upon demand, such a demand must be made before an action may be brought against him. However, the limitation period in respect of claims under the guarantee does not begin to run until the demand is made. Any such demand must be clear and unequivocal. [...]

6.27 It is not necessary that the creditor demand the exact amount that ultimately proves to be owing by the surety: the real purpose of a formal demand is no more than to advise the surety that there has been a default, so as to bring the guarantee into play. The fact that it is subsequently shown that the creditor was owed less than the amount demanded does not relieve the surety of his obligation to perform [Emphasis added].

223In the Caisse Populaire case, Justice Rideout ultimately held that the demand letter was insufficient, as it did not provide the necessary clear demand. The correspondence indicated only that:

La Caisse is not prepared to allow the situation to continue, La Caisse will have no choice but to consider legal action pursuant to the Personal Guarantee, situation is completely unacceptable and the lawyer for La Caisse will have no choice but to advise La Caisse to commence enforcement procedures which can include suing all Guarantors. (Caisse Populaire at para 30)

224While the demand in the case at hand is referred to as an Undertaking, it does not set out the specific amount of debt owing, and it is not signed by the lenders or their authorized agents, the Court finds that, on this particular set of facts, sufficient demand has, nonetheless, been made (See: Dow v. Canadian Commercial Bank, 1986 CarswellOnt 4633, at paras 20 and 26). The Court is persuaded by the fact that the demand provided notice in writing, required immediate repayment via an immediate payment plan, set a deadline for repayment, as well as a reasonable period of time for repayment of 50% of the debts. Moreover, the fact that Mr. Bossio signed the demand ensured that notice was provided and received by the borrower, fulfilling the underlying purpose of the demand: to notify the borrower of the lender’s “right to immediate repayment of such loans” (Hare at para 50).

225As the Court finds that demand was delivered on November 2, 2007, the two year basic limitation period began to run from that date, for the unsecured loans.

226The Counterclaim was commenced on July 10, 2010. The Court finds that the January 12, 2009, loan to Mr. Kyser for $15,000 and the February 10, 2009, loan to Mr. Kyser for $10,000 (both documented by way of promissory notes) fall within the limitation period. As such the Court finds that they are not statute barred.

227The Xtra Gold loan is dated January 30, 2004, and was due on demand. Mr. Kyser did not discover that the Xtra Gold shares had been sold until about September 8, 2008, when he demanded that the shares be sold or transferred to his account. Since the sale of the shares was not discovered until September 8, 2008, and the Counterclaim was commenced in July 2010, the Court finds that this loan is not statute barred.

228The Defendants acknowledged that the promissory note dated November 2, 2005 is statute barred. The Court also notes that the promissory note is not payable to any of the Defendants but rather to a third-party.

229Therefore, the Court finds that since the November 2, 2005, promissory note to statute is barred, no amount is due and owing on this promissory note.

230The Court finds that based on the aforesaid analysis, the following loans are also statute barred:

a) Promissory Note dated January 30, 2004 to NUTOK for $6,000

b) Promissory Note dated May 27, 2005 to Mr. Kyser for $100,000 USD

c) Promissory Note dated July 7, 2005 to NUTOK for $75,000

d) Promissory Note dated August 14, 2006 to Mr. Kyser for $10,000

e) Promissory Note dated February 1, 2007 to Mr. Kyser for $10,000

f) Promissory Note dated July 27, 2007 to Mr. Kyser for $10,000

g) Promissory Note dated November 2, 2007 to Mr. Kyser for $25,000

Issue #7: What Amounts are Owing to Mr. Kyser, NUTOK and KUL by Mr. Bossio?

Plaintiff’s Position:

231Mr. Bossio acknowledges that there are monies owing to Mr. Kyser and to KUL. He argues that the NUTOK Mortgage had been paid in full via the insurance proceeds, as well as a part of the KUL Mortgage. As of November 16, 2008, the outstanding debts to Mr. Kyser and KUL would be approximately $90,000. As to the debts to NUTOK, Mr. Bossio argues that they are statute barred. As to the monies owing to Mr. Kyser, Mr. Bossio submits that some of the monies are owed, but the amounts are much less than what is claimed by Mr. Kyser.

Defendants’ Position:

232The Defendant Group argues that the Defendants are owed the amounts set out in the Appendix of the Defendant Group’s written submissions. The totals are as follows:

a) NUTOK $264,955.33

b) KUL $246,473.33

c) Mr. Kyser $500,127.90

Total: $1,011,556.56

Analysis:

233The Court has previously found that the $200,000 of insurance proceeds paid the NUTOK mortgage in full, and a portion of the KUL mortgage. Based on that finding, the Court has prepared its own calculations to determine the amounts due and owing. These calculations are set out in the Appendices at the end of the decision.

234Based on the Court’s calculations, it finds that the following amounts are owed by Mr. Bossio to the Defendant Group:

a) Owing to NUTOK: The Court finds that there are no monies owing to NUTOK because the mortgage debt has been paid in full.

b) Owing to KUL: As of November 15, 2008, KUL was owed $135,493.89. The balance of the insurance proceeds after payment of the NUTOK Mortgage was $45,337.19. Applying the balance to KUL would leave a balance of $90,158.70 outstanding as of November 15, 2008. In addition, interest would be owing to the date of payment. As of February 28, 2015, the balance owing would be $190,968.98. The per diem would be $62.51.

c) Owing to Mr. Kyser: The Court has previously found that only three loans documented by way of promissory notes are not statute barred. They are the Xtra Gold promissory note (dated January 30, 2004) for $17,500 USD, the promissory note (dated January 12, 2009) for $15,000, and the promissory note (dated February 10, 2009) for $10,000.

i. Xtra Gold Promissory Note: Based on the calculations in the Appendices, the amount owing on this promissory note as of February 28, 2015, would be $42,348.20. The per diem is $9.22 USD.

ii. January 12, 2009 Promissory Note: Based on the calculations in the Appendices, the amount owing on this promissory note as of February 28, 2015 would be $27,491.10. The per diem is $7.53.

iii. February 10, 2009 Promissory Note: Based on the calculations in the Appendices, the amount owing on the promissory note as at February 28, 2015, would be $18,265.60. The per diem is $4.98.

Issue #8: Is Mr. Bossio Entitled to Damages against Mr. Kyser due to the Failed Refinancing?

Plaintiff’s Position:

235At trial the Plaintiff acknowledged that it was abandoning its claim for damages for breach of fiduciary duty.

236There still remains the claim for damages based on Mr. Bossio’s failure to be able to obtain refinancing.

237Mr. Bossio argues that Mr. Kyser caused NUTOK and KUL to refuse to discharge their mortgages when refinancing was arranged by Mr. Bossio to pay them out and to pay out Mr. Mancini, who, at the time, was prepared to accept approximately $143,000 in settlement of his claim. Mr. Mancini’s judgment now stands at about $450,000, and a writ of seizure and sale has been registered against the Madoc Lands.

238Mr. Bossio argues that the damages are well in excess of $30,000, and that no judgment should issue in favour of either NUTOK or KUL for that reason alone.

Defendants’ Position:

239The Defendant acknowledges that the claim for breach of fiduciary duty has been abandoned.

240The Defendant Group argues that the Plaintiff led no evidence about his claim for damages based on his failure to refinance.

Analysis:

241The Court finds that there is no breach of fiduciary duty, as that claim has been abandoned by the Plaintiff.

242As to the issue of damages for the non-completion of the refinancing, the Court did not hear any evidence from Mr. Bossio about the alleged damages or their quantum.

243The Court has reviewed: (1) the submissions made with respect to this issue, (2) the May 3, 2010, demand letter from Graham Tobe Professional Corporation to Mr. Bossio concerning the NUTOK Mortgage and the KUL power of sale documentation; and, (3) a letter from Mr. Kyser to Andrew McLachlin, dated May 13, 2009, setting out the balance owing on the NUTOK and KUL mortgage. Nothing in those documents provide any evidence of the alleged damages suffered by Mr. Bossio.

244Therefore, the Court finds that there is insufficient evidence to find that damages are payable to Mr. Bossio by any of Mr. Kyser, KUL or NUTOK as claimed. Therefore, the Plaintiff’s claim with respect to these damages is dismissed.

Conclusion:

245The Court has prepared the calculations for the amounts due and owing under the NUTOK mortgage to November 15, 2008, at which time, in accordance with the Court findings, it was paid off.

246The Court has prepared calculations for the amounts due and owing under the KUL mortgage to November 15, 2008, and thereafter for the balance outstanding after the deduction of the insurance proceeds available for that mortgage.

247The Court acknowledges that its calculations attempt to reflect the dates of the actual advances, however, since advances were not made on the same day of each month, there may be some minor miscalculations of interest in relation to the amounts owing based on the dates of each advance.

248The NUTOK mortgage claims interest at the rate of 12% per annum. The July 7, 2005, loan claims interest at 18% per annum. The parties acknowledged that the July 7, 2005, loan was part of the NUTOK mortgage. The Court finds that the interest rate on the $75,000 advance of July 7, 2005, is to be calculated at 12% and not 18% per annum, because that advance was part of the NUTOK mortgage.

249In relation to the KUL mortgage, the Court has accepted the calculation provided by the Defendant Group, that $2,122.52 is the correct amount of interest payable on the first three tranches paid in January, February, and March 2006 under that mortgage. Since interest was paid as of April 30, 2006, the interest calculations will commence on May 1, 2006, on the full $100,000.

250As discussed earlier, the NUTOK mortgage has been repaid in full and is hereby discharged. According to the Court’s calculations, the amount owing on the NUTOK mortgage for principal and interest as of November 15, 2008, was $154,662.81. This amount has been applied from the insurance proceeds on the NUTOK mortgage, which has been paid in full.

251After the payment of the NUTOK mortgage there was $45,337.19 remaining from the insurance proceeds.

252According to the Court’s calculations, the amount owing on the KUL mortgage for principal and interest as it November 15, 2008 was $135,493.89.

253The balance for the insurance proceeds of $45,337.19 was applied to the KUL mortgage, leaving an outstanding balance of $90,158.70 as of November 15, 2008.

254According to the Court’s calculations, the balance outstanding on the KUL mortgage as of February 28, 2015 is $190,968.98 with the per diem of $62.51.

255The Xtra Gold loan, dated January 30, 2004, for $17,500 USD with interest at 8% per annum has a balance outstanding as of February 28, 2015, of $42,348.20USD, with a per diem of $9.22 USD.

256Mr. Bossio owes Mr. Kyser the sum of $37,400 USD for the sale of Mr. Kyser’s Xtra Gold shares (50,000 x $0.748 USD).

257The January 12, 2009, loan has a balance outstanding as of February 28, 2015, of $27,491.10, with the per diem of $7.53.

258The February 10, 2009, loan has a balance outstanding as of February 28, 2015, of $18,265.60, with a per diem at $4.98.

259The Limitations Act provides a two year limitation for amounts due on demand. Based on the aforesaid, the Court finds that the following promissory notes are either statute barred or do not relate to this action:

a) Promissory Note dated January 30, 2004 to NUTOK for $6,000

b) Promissory Note dated May 27, 2005 to Mr. Kyser for $100,000 USD

c) Promissory Note dated November 2, 2005 to 831849 Ontario Inc. for $75,000 USD

d) Promissory Note dated July 7, 2005 to NUTOK for $75,000

e) Promissory Note dated July 7, 2006 to Fontainbleau Apartments Ltd. for $20,000

f) Promissory Note dated August 14, 2006 to Mr. Kyser for $10,000

g) Promissory Note dated February 1, 2007 to Mr. Kyser for $10,000

h) Promissory Note dated July 27, 2007 to Mr. Kyser for $10,000

i) Promissory Note dated November 2, 2007 to Mr. Kyser for $25,000

260Based on the aforesaid calculations the amounts owing by Mr. Bossio are as follows: Owing to KUL:

a) on the mortgage to February 28, 2015 $190,968.98.

Owing to Mr. Kyser:

b) Promissory Note dated January 12, 2009 as at February 28, 2015 $27,491.10, inclusive of principal and interest;

c) Promissory Note dated February 10, 2009 as at February 12, 2015 $18,265.60, inclusive of principal and interest;

d) Xtra Gold Promissory Note as at January 30, 2015 $42,348.20 USD, inclusive of principal and interest; and,

e) Xtra Gold Share proceeds of Mr. Kyser $37,400 USD.

261Post-judgment interest shall be paid by the Plaintiff on the outstanding KUL mortgage in accordance with the terms thereof.

262Post-judgment interest shall be paid on the outstanding promissory notes in accordance with the terms thereof.

Orders to be Made:

1. The mortgage in favour of NUTOK, being Mortgage No. QR641273, registered on April 15, 2004, against the Madoc Lands has been paid in full and is discharged from the title.

2. Mr. Bossio shall have 75 days from the date hereof to refinance the amounts due and owing in this decision. The Defendant Group shall not take any action to enforce this decision until the 75 days has expired. In the event that any of Mr. Kyser, NUTOK or KUL have filed any types of liens against Mr. Bossio’s property with respect to these debts, those liens shall be lifted for the purpose of obtaining and registering the new financing.

3. In the event that there are any questions in relation to the mechanics of this order, or the mechanics of the calculations, the parties shall write to the Court within 15 days from this date setting out their concerns.

Costs:

263The parties shall have 14 days after the release of this decision to resolve the issue of costs. If they are unable to do so, the Plaintiff shall have 14 days to submit written costs submissions of no more than three pages, together with a Costs Outline and any Rule 49 Offers to Settle. The Defendants shall have a further 14 days thereafter to submit their written costs submissions of no more than three pages with a costs outline and any Rule 49 Offers to Settle. Thereafter, the Plaintiff shall have a further 10 days for a reply, of no more than three pages. All costs submissions shall comply with Rule 4.01 of the Rules of Civil Procedure.

264Order accordingly.

Mr. Justice Stanley J. Kershman

Released: February 26, 2015

CITATION: Bossio v. Nutok Corporation, 2015 ONSC 1305

BELLEVILLE COURT FILE NO.: CV-10-0123-00

DATE: 2015/02/26

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

SALVATORE BOSSIO

Applicant/Plaintiff/Defendant by Counterclaim

-and-

NUTOK CORPORATION, KUL HOLDINGS LTD, and WOLFGANG H. KYSER

Respondents/Defendants/Plaintiffs by Counterclaim